Nov. 28 (Bloomberg) -- Mark Carney may be more willing to
look further into the future than Mervyn King.

As Carney prepares to take control of the Bank of England,
former central bank economists say his five years atop the Bank
of Canada suggest he will be more inventive and open than the
current governor in outlining plans to spur the U.K. recovery.

Although King pursues quantitative easing, the Bank of
England rejects a Canadian crisis-fighting strategy -- later
adopted by Federal Reserve Chairman Ben S. Bernanke -- of
specifying how long interest rates will remain low. That stance
may be revisited if Carney arrives in London in seven months to
find the U.K. still stuck in a recessionary rut.

“Mervyn was very proactive in beginning gilt purchases,
but he is still less pragmatic than Carney, who may be open to a
wider range of options,” said Simon Wells, chief U.K. economist
at HSBC Holdings Plc in London and a Bank of England official
until last year.

Carney, 47, embraced greater transparency as an emergency
tool in 2009 when he promised to keep Canada’s benchmark rate,
then at 0.25 percent, low for 15 months as long as the inflation
outlook didn’t change. Bernanke followed in August 2011 when the
Fed said it would hold its key rate near zero at least through
mid-2013, a range it subsequently extended by two years.

Such vows are aimed at adding stimulus to an economy where
short-term rates are already around rock-bottom by persuading
investors to contain longer-term borrowing costs because they
know official rates won’t rise.

Asset Prices

“It keeps the whole interest-rate structure down and helps
the macroeconomy by boosting asset prices such as stocks and
housing,” said Mark Zandi, chief economist at Moody’s Analytics
in West Chester, Pennsylvania.

A 2010 Bank of Canada discussion paper said its
“conditional commitment likely has produced a persistent effect
in lowering Canadian interest rates relative to what their
historical relationship with inflation and unemployment rates
would imply.”

King, 64, has nevertheless rejected proposals from former
colleagues such as Andrew Sentance to chart a public course for
policy, saying as recently as two weeks ago that it would reduce
the central bank’s flexibility.

“We don’t pretend to tell people what our policy will be
in future,” he told reporters in London on Nov. 14. “There
doesn’t seem much point in having monthly meetings if you
already know what decision you’re going to take. I think it’s a
mistake to try and pretend that we can anticipate what those
decisions would be.”

Voting Differences

Another argument, made by then-Deputy Governor Rachel Lomax
in 2007, is that the bank’s Monetary Policy Committee is “not a
consensual body” so it would be hard to find agreement on the
path of policy. By contrast, Carney’s current panel at the Bank
of Canada sets rates by consensus.

Bank of England Deputy Governor Charlie Bean said in an
interview yesterday that Carney’s hiring is a “coup” for the
U.K. and predicted he will bring “new thoughts.”

“When any new governor is going to come in, it’s always an
opportunity for change,” said Bean, who agreed to extend his
own term for a year to assist the handover. “Having run the
Bank of Canada, he will have particular things he may think
useful for us to import.”

Speech Tally

Carney has followed transparency in other ways where King
has not. He has delivered about double the number of speeches
King has in the past four years. Canada’s policy reports also
contain specific base-case projections for inflation and growth,
while the U.K.’s forecasts are less clear and King emphasizes
the probabilities surrounding them, as he did yesterday in
saying “the essence of policy making is looking at the balance
of risks.”

“Perhaps that also gives an indication of where the BOE
could be headed,” said Robert Wood, a former Bank of England
official until his move earlier this year to Berenberg Bank.

King’s institution also came under fire this month when an
independent review said its forecasting capabilities have
deteriorated and that its projections for growth and inflation
were too optimistic.

While the Bank of Canada always releases statements after
each policy decision, the Bank of England tends to only do so
when changing tack. Canadian policy makers also include a
“policy inclination statement” in their announcements, often
repeated in speeches, that’s aimed at giving investors a sense
of where borrowing costs may be headed.

Policy Withdrawal

“Over time, some modest withdrawal of monetary policy
stimulus will likely be required,” the Bank of Canada said in
its last statement. “The timing and degree of any such
withdrawal will be weighed carefully against global and domestic
developments, including the evolution of imbalances in the
household sector.”

Still, Carney has found that this approach can have
pitfalls. Investors priced out any chance of interest-rate
increases after his Oct. 15 speech failed to repeat the bank’s
policy statement, only to reverse course when it reappeared at
the next week’s rate announcement.

Saved from having to pursue asset purchases by an economy
that bounced out of the 2009 recession and witnessed no bank
bailouts, Carney may be more skeptical than King “about the
efficacy of further gilt purchases,” said Jens Larsen, chief
European economist at RBC Capital Markets in London who worked
at the Bank of England until 2010.

Double Dip

King argues that his asset-purchase program, which now
totals 375 billion pounds ($601 billion), helped avert a deeper
slump even as the U.K. suffered its first double-dip recession
since the 1970s.

If Carney shifts U.K. policy away from bond buying, it will
remove support from the gilt market, Michael Amey, a portfolio
manager at Pacific Investment Management Co. in London, said
yesterday on Bloomberg Television’s “On The Move” with
Francine Lacqua.

Carney has “been more keen on forward guidance on interest
rates rather than pure QE, and we know that Governor King has
not been particularly keen on forward guidance,” Amey said.
“That’s something that we’ll be looking at.”

Circumstances can change an official once in office. Having
voted more than any other colleague to raise interest rates when
he was deputy governor, King, who became governor in 2003,
recently chose to set aside concerns about inflation to
encourage economic growth.

Inflation Targeting

Both King and Carney back inflation targeting against
critics who say it failed to prevent the worst financial turmoil
since the Great Depression. Canada last year studied whether to
change its goal from the current midpoint of 1 percent to 3
percent before renewing it.

Carney, who will become the first outsider to run the Bank
of England since 1983, says his regime should still be flexible
in leaning against asset bubbles, something Citigroup Inc.
economists say the U.K. central bank failed to do in the pre-crisis boom when it tolerated high credit growth and low
savings. Carney has recently cited record household debt as
Canada’s biggest risk.

Carney may not have been as “resolute as King” in
ignoring three years of above-target inflation, said Derek Holt
and Dov Zigler, economists in the capital-markets unit of Bank
of Nova Scotia in Toronto.

Carney raised borrowing costs three times in 2010 to the
current 1 percent. King has held the U.K. benchmark rate at 0.5
percent even with inflation above the 2 percent goal since late
2009.

“The relatively hawkish stance of the BOC suggests the BOE
may enjoy a slightly less dovish culture in future, albeit with
the same policy mix,” according to Philip Rush, an economist at
Nomura International Plc in London.